Rod Meloni: Perspective on day 3 of the UAW-GM national strike

United Auto Workers (UAW) members picket at a gate at the General Motors Flint Assembly Plant inMichigan.

DETROIT – Over the past couple of days, I’ve repeatedly expressed the point; the strike rules are different this time around. We’ve picked up some new tidbits about how we got here today so let’s recap. GM made a substantive offer about two hours before the strike deadline Saturday night. The union told GM it was too little too late. Of course, that turned-back, came after the union already publicly announced Saturday afternoon it would let the 2015 national contract deadline expire and would hold a Sunday morning news conference to let the world know all is decidedly not well. Then the union opted for a national strike instead of targeting individual, crucial plants. It’s more expensive this way.

GM leadership looked at that breathtaking bit of brinksmanship and considered how the UAW scandal might have played a role in the hardball the union decided to play. You see, federal agents arrested UAW Region 5 Director Vance Pearson the week before on embezzlement and wire fraud charges. He sits on the UAW Board of Directors and is the successor to and close confidant of UAW President Gary Jones. For his part, Jones has been conspicuously absent from public view, especially after the feds raided his Canton home last month. Yet, Jones was deeply involved in all the decision-making that led to the strike. What’s more, we’ve since learned, it is a walkout that didn’t have to happen! UAW-GM Vice President Terry Dittes, in a letter to GM, wrote that had the company’s offer come sooner, they could have had a deal by now. But the UAW scandal played an even larger part in the lead up to the strike. Local Four news has confirmed Vance Pearson not only came to Detroit for the UAW Board Meeting last Friday night, he also sat in on meetings related to the strike vote. GM took an especially dim view of all of this and decided it was time to return fire. So at this point, the score reads: Union-2 GM- less than zero.

Moments after the strike announcement, GM broke long-standing tradition and made public its last-minute offer looking to shed light on the union’s tactics. It then put its executive vice president of manufacturing on camera in GM World [the downstairs Ren Cen car museum] and taped a video about the deal the company shipped to every media outlet with an email box. You might say at this point it’s UAW 2, GM 1. Not liking the return fire, Terry Dittes went on national TV outlets CNN and CNBC Monday morning to decry the company’s nontraditional return salvo and proceeded to divulge usually-off-limits information about how little progress there has been up until Monday morning.

That brings us to today, where we see the hardball at hand is not just about public relations. The strike is a very blunt instrument of mutual destruction. [emphasis on blunt]. Still, the UAW was completely unprepared for GM’s next salvo. There has traditionally been a gentleman’s agreement during a strike, the company pays union member health care benefits until the end of the month. UAW-GM Vice President Terry Dittes found himself last night telling his rank and file they could expect the company to keep them on the gold-plated health care plan until October first. [The health care plan by-the-way, is considered among the best in the nation]. Dittes decided to write a letter Monday night to GM with a presumptive close. He was looking to confirm his words about health care to his membership. The sun came up this morning and GM fired its most devastating shot. It ended rank and file health coverage today. The UAW leadership immediately swallowed hard. Under its bylaws, the union is required to pick up the cost of COBRA when the company opts to end paying health care. UAW-2 GM 2.

Now, let’s for a moment, consider the pressure the UAW initially put on GM. It stands to lose roughly $100 Million a day with all its plants shuttered. Immediately, it looks to find ways to mitigate strike costs. It also considers the union’s attitude. Then it looks to find ways to turn the strike leverage to its advantage. Put the union faithful on COBRA and you have everyone’s attention. As already stated, but requires repeating, this instantly shifts significant health care costs to the union. Let’s discuss how. The union strike fund is estimated to have just under $1 billion, built up through union dues over the past dozen years. In this strike, 47,000 GM-UAW rank and file members are expecting to receive an increased strike stipend of $250 a week. The quick math puts that at a $12 million a week cost. All seems well. But paying COBRA costs for 47,000 UAW-GM employees will drain the strike fund in about a New York minute! This is a pier six, bare knuckle brawl. And to think in recent national contracts they called each other partners! Well, again, the rules of the game, and even the game, have changed.

So now what? Well, Vance Pearson waived his preliminary exam and extradition hearing in St. Louis today in the scandal criminal case. He’ll return to Detroit to face a federal judge soon for an arraignment. He’s out on personal recognizance bond for the time being. National contract talks carried on all day yesterday and ended about 9 p.m. last night. Bargaining teams returned to the table this morning and are still talking as of this writing. The true signal we’re getting closer to a deal comes when the talks go around the clock. They usually push through the final issues toward the end which is why sometimes they settle at 2 or 3 o’clock in the morning. So far, we’ve seen no evidence we’re near that point. Still, the blunt instrument has knocked both parties for a loop. Everyone knows the score. And as I said yesterday, the talks are ongoing, the meter is running, everyone stands to lose more here if they don’t get a deal soon. Everyone is incentivize. Can cooler heads can prevail?

About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.